Governments and business leaders on edge as Xi's anti-corruption campaign rolls on

Four years ago Wang Zongnan was at the forefront of China's push overseas.

As chair of the country's second biggest retail company, the state-backed Bright Food Group, he was on the cusp of taking control of one of Britain's most famous cereal brands, the 80-year old Weetabix.

He was also spending plenty of time in Australia, running the ruler over Treasury Wine Estates – a deal which never eventuated – and putting the finishing touches on Bright's $400 million acquisition of Manassen Foods, owner of Sunbeam fruits, Margaret River Cheeses and Carrs water crackers.

Former Chinese president Jiang Zemin and his faction still hold significant sway within the party.
Reuters

Wang had also spearheaded unsuccessful attempts to buy CSR's sugar division and French yoghurt maker Yoplait. His mandate was clear. China was moving out into the world and Bright Food, steered by Wang, had been handpicked to lead the global retail expansion.

Wang was also being courted by Australian diplomats as Bright Food became the friendly face of Chinese investment. Australia's ambassador in China, Frances Adamson, met with Wang at the company's Shanghai headquarters in June 2013 to discuss the group's investments. But shortly after that meeting, Wang's star began to fall. He resigned from Bright Food and soon became the subject of a corruption investigation.

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Now he is in jail.

Last Tuesday, a Shanghai court found him guilty of embezzling 195 million yuan ($41 million) and sentenced him to 18 years in prison. According to the ruling, as reported by state-owned news agency Xinhua, Wang's corrupt dealings took place between 2001 and 2006, while he was working for a prominent supermarket chain and before he joined Bright Food.

Still, at a time when Chinese investors are bidding on everything from NSW electricity assets to commercial property and dairy farms, his downfall highlights the precarious position of Chinese business leaders almost three years into an unprecedented anti-corruption campaign. It also serves as an example of the murky crossover that exists between business and politics in China.

Political analysts speculate Wang's sudden and dramatic fall from grace was related to his close links to former Chinese president Jiang Zemin. The 89-year old former leader, and his political faction, still hold significant sway within the Party and have reportedly clashed with current President Xi Jinping on issues including the anti-corruption campaign itself.

This internal party battle spilled over onto the pages of the People's Daily earlier this month, when it published a surprising editorial criticising (without naming) retired senior officials, who attempted to influence crucial government decisions via people appointed to powerful positions while they were in office.

Summit shrouded in secrecy

Some articles in the state media have also downplayed the importance of the annual meeting of party powerbrokers at the seaside resort town of Beidaihe. The informal summit, attended by leaders past and present, is shrouded in secrecy but happens around this time every year and is believed to set the party's agenda over the next 12 months.

While meetings between political leaders and academics in the town have already been reported, some in the state-owned media have downplayed Beidaihe's importance, insisting major government decisions are decided by the 25-member Politburo.

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Either way, the anti-corruption campaign remains a divisive issue. Wang's case was also problematic for another of China's prominent corporate players on the world stage. Fosun Group, a private company which has built up a large stable of overseas assets including stakes in French resort operator Club Med, Canada's Cirque du Soleil and Australia's Roc Oil, was forced to put out a statement following the court's findings.

Xinhua said in its report on the trial Wang had asked Fosun chairman, billionaire Guo Guangcheng, in 2003 for help in purchasing two properties for his parents, which he then bought at a discount in exchange for unspecified "benefits."

Fosun said it had not received any benefits and the discount was in the "normal range" during an "extreme property downturn."

It's not just business leaders struggling to deal with the fallout from the anti-corruption campaign, which is either an important economic reform or political witch-hunt depending on who you are talking to. Governments and diplomats are also scrambling to respond.

On the one hand, they don't want to appear critical of a campaign that, taken at face value, is cleaning up the way business is done in China. At the same time, they are being very cautious about the nature and level of that cooperation.

The difficulties for governments were evident during the week, after Beijing criticised Washington for providing a safe haven for criminals after a report in the New York Times said the Obama administration had warned China not to send in undercover agents to strong-arm corruption suspects into returning home.

More than 10,000 people poured into the nation's capital on the ninth day of protests over police brutality, but what awaited them was a city that no longer felt as if it was being occupied by its own country's military.